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Friday, October 20, 2017

Why Small States Are Better

An interesting debate that completely misses the most important issue regarding states. They are all based on the establishment of a hierarchy for governance. This fails the further removed a natural community is from the apparent source of power. Thus natural imbalances promote conflict whose natural resolution is resisted by even individuals.

All of which undermines the legitimacy of the State concept.

My solution to this is to formally establish engineered natural communities for the poor initially and apply the rule of twelve to establish internal credit allowing optimal internal growth. The State would still act to arbitrate money and power as necessary but not often.

This approach also allows a super state to evolve as well without the striving for irrational and intangible power.

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Why Small States Are Better

Philipp BagusAndreas Marquart

https://mises.org/blog/why-small-states-are-better

Andreas Marquart and Philipp Bagus (see their mises.org author pages here and here)
were recently interviewed about their new book by the Austrian
Economics Center. Unfortunately for English-language readers, the book
is only available in German. Nevertheless, the interview offers some
valuable insights.

Mr. Marquart, Mr. Bagus, you have released your new book „Wir schaffen das – alleine!”
(“We can do it – alone!”) this spring. The subtitle says: “Why small
states are just better.” To begin: Why are small states generally better
than larger ones?

Andreas Marquart (AM): In small states
the government is closer to its citizens and by that better observable
and controllable by the populace. Small states are more flexible and are
better at reacting and adapting to challenges. Furthermore, there is a
tendency that small states are more peaceful, because they can’t produce
all goods and services by themselves and are thereby dependent on
undisturbed trade.

How far can the principle of small
states go? You are for example open to the idea of Bavaria seceding from
Germany, or Upper Bavaria then from the rest of Bavaria. Ludwig von
Mises stopped at
the communal level, thinking that the secession of individuals would be
unrealistic. You as well? Is there a point when your rule – the more
decentralized the better – is not true anymore?

Philipp
Bagus (PB): In principle not. We don’t want to arrogate, however, to
know the optimal size and to say that this state is too small and that
one too big. The optimal size would be determined in competition through
the right of secession. If an apartment tower or street secedes from
its municipality and then concludes that there are problems which were
previously done better, then the secession could be revoked and the two
entities reunited. Are they are better off alone, however, they will
stay seceded. In this competition it will then show how successful small
states can be.

At the moment we see more and more
attempts around the world to secede – Brexit for example or recent
attempts by Scotland and Catalonia. What all these cases have in common
is that the secession is executed by governments which are economically
more on the Left, and by that probably no advantage can be seen for the
seceding entity, since the newly gained freedom is used immediately for
more state intervention. Are cases such as these, where the secession
would bring forth downsides for that country, also to support?

AM:
Generally secession attempts should always be supported. The citizens
must have a right to self-determination. Even the UN charter says that a
people or a nation has the right to establish its own state or to join
another nation. If a region wants to secede to try again if socialism
works, then so be it. We learn from mistakes. And the smaller the
states, the quicker and clearer the mistakes will become visible and the
quicker changes have to implemented. After Brexit for example Britain
will be under immense pressure to set itself apart from the EU. By the
way, I don’t know any government and close to no party in Europe or any
other country which isn’t in some way on the Left. In which way for
example is the conservative CDU in Germany any different than the social
democratic SPD or the Greens? Or the “classical liberal” FDP? Real
classical liberal or liberty-oriented politics cannot be found anymore.
All the differences are mere nuances and everyone is similar to each
other in a more or less social democratic mishmash.

Would
it be possible in your model that small states still cooperate with each
other in supranational organizations? Or are the EU, NATO, UN etc. all
obsolete in the end?

PB: Of course small states could or
even have to cooperate with one another, especially on defense – at
least as long as larger states still exist, which have a tendency to be
more aggressive. Forms of cooperation like free-trade zones or also
organizations which contribute to the harmonization of standards would
exist. The EU in its current form is pointless, it has outgrown its
original purpose of a pure cooperation.

On foreign policy
you argue that small states conduct less wars. For many this will sound
unintelligible at first, considering the common picture of the Middle
Ages, where there were many more small states than today, is one of
constant conflicts between kings and nobility. Why doesn’t this have to
be the case?

AM: I don’t think we can compare those days
with today. We are on a totally different level in terms of
civilization. What has not changed of course: wars are about resources.
In the past, most fighting occurred over land since farming was so
significant and was in no way as productive as it is today. And when
there were no possibilities to trade in the Middle Ages, it wasn’t too
tragic, because the division of labor had nowhere near the significance
it has today. Because of the very advanced international division of
labor no small state of today can afford to deny itself from foreign
trade or that the flow of goods is stopped – at least as long as it
doesn’t want its population to starve as it happens in North Korea. So
one has to behave peacefully. Just look at Liechtenstein: They haven’t
even had an army since 1868. Free trade is the ultimate guarantor of
peace.

You often use the example of Switzerland in your book. In which ways does this country show how small states work?

PB:
It relies on free trade, open borders, has relatively low taxes, a high
standard of living and didn’t have to moan over war deaths in the
twentieth century. It is often asserted that small states can’t protect
its population, that it would lead to different standards or new trade
barriers which would prevent trade from happening, or that it would be
overrun by economic refugees. Switzerland is the counterexample.

As
good as Switzerland – or also small states such as San Marino or
Liechtenstein – may work, there are still counterexamples like Belgium, a
country which has always remained neutral, but was still overrun by
Germany in both World Wars – among other things due to its overall
weakness. How does the sorrow of Belgium fit into the overall picture?

AM:
For one we are not saying that a world of small states would be heaven
on earth. Libertarians should in general watch out for not creating the
impression that in the world they describe all problems we are fighting
over today would vanish. We can assume nonetheless that in a world of
small states both World War I and II would not have happened in all
likelihood. And if the gold standard hadn’t been suspended at the
beginning of World War I, the war – if he had broken out at all – would
have been over within a few days, since the warring parties would have
run out of money. Of course there could arise the situation that a small
state is threatened by a “big neighbor.” In this case the small state
can enter a defense alliance. Examples from the past – the Hanseatic
League or the German Confederation – are manifold. In the same way that
goods and services are organized on the market to cover the demand of
the consumers, alliances between small states would organize if they
demand protection and security. Humans are very ingenious if they are
allowed to act freely. We shouldn’t underestimate this ability.

Followers of the realist school of thought would
probably argue that the idea of small states is surely nice, but that
in the world we live in not everyone thinks that way. To give examples:
Wouldn’t it be possible that assuming the US breaks apart, Russia would
quickly invade Eastern Europe? Especially at the end of World War II,
the Soviet Union would have had the chance to conquer the entire
continent, but there was the US and Great Britain who restored the
balance of power. Aren’t major powers on the global stage in this sense
necessary to prevent the not-so-friendly states – who would never be
pleased by the idea of small states – from taking over?

PB:
Clearly we have to stay realistic. The Soviet Union would also have had
the chance to subdue entire Europe at the beginning of World War II,
when a Greater Germany was opposed to them. The Soviet Union possibly
would have conquered the entire continent if the many small German
states of the early nineteenth century had continued to exist. But maybe
the German small states would also have implemented a common defense,
we don’t know. To guarantee to win a war is impossible. Going back to
today: Even if the US would break apart they could still forge a common
defense alliance and the Baltic states could also search for allies and
make a Russian attack as expensive as possible – for example by arming
the populace. Maybe the separated US wouldn’t be as aggressive anymore
abroad which would lead to fewer wars. We should also keep in mind that
since World War II we are in a nuclear age which deters aggressors. Even
after a split by the US this deterrence would remain. Moreover – as
mentioned already – because of globalization the costs of war would
increase constantly between mutually connected economies.

Specifically
libertarians in the US are often accused of being in favor of
isolationism or even autarky whenever they demand to leave supranational
organizations, to intervene less in foreign conflicts and to look at
the national interest first. Why is this accusation missing the mark?

AM:
The problem is that the terms “isolationism” and “non-interventionism”
are lumped together by proponents of an interventionist foreign policy.
Non-interventionism – that means trade with other countries, travelling
to other countries, cultural exchange, respect for one another, but not
meddling in the affairs of other nations – has nothing to do with
“isolating” oneself. I wouldn’t take the accusation of advocacy for
autarky serious. By mixing up terms it is obviously tried to color
libertarians in backwardness to win over support for an interventionist
foreign policy. The type of foreign policy the US is conducting needs a
certain amount of support from the population. This is only possible,
though – when one doesn’t have any arguments – by discrediting the
opponents.

You have an entire chapter in your book on
monetary systems and why they would work better in a world of small
states. We at the Austrian Economics Center are of course particularly
interested in that. Could you shortly outline the advantages on that
specific point?

PB: Larger states also imply monetary
harmonization. Monetary competition in the Eurozone has declined due to
the introduction of the euro. Before the euro, a Spaniard could buy DM,
Franc or Lire to protect himself against inflation. One could see which
monetary policy worked better and which worse. The Dutch central bank
for example followed the German Bundesbank. So there was an
institutional competition and a trial and error process. Today we have
an Italian monetary policy for everyone in the Eurozone. Small states
have to offer their citizens stable currencies or attach themselves to
stable currency zones or else they will quickly lose companies and
citizens. Borders aren’t that far away after all.

On a
final note the everlasting question that libertarians get to hear sooner
or later: Only theory or also imaginable in reality? Do you think we
will ever see a world of small states, a world in which those states
live next to each other peacefully and a world in which free trade over
borders is possible without any problems (or where borders become even
completely irrelevant)?

AM: It sounds as if you are
asking if it isn’t utopian to imagine a world of small states – but
utopian is only what is not working in practice. A world of small states
can work. And the path to that point? Brexit could be the beginning of
the end for the EU. If Britain is smart, it will lower taxes and embrace
truly free trade. By that, they could trigger an economic boom in
Britain, encourage other countries to imitate them and put pressure on
the individual EU members to follow. Another possibility is the collapse
of the paper money system which unavoidably would lead to distribution
battles. Distribution battles in the sense that wealthier regions,
having their own problems, will refuse to co-finance others – northern
Italy, Bavaria, Baden-Wuerttemberg for example. Borders can only become
irrelevant concerning free trade, though. Otherwise they are needed.
Only through borders can bad governments, which will exist, be
challenged.

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About Me

Apr 2017 - 4.1 Mil Pg Views, March 2013 - Posted my paper introducing CLOUD COSMOLOGY & NEUTRAL NEUTRINO rigorously described as the SPACE TIME PENDULUM, September 2010 I am pleased to report that my essay titled A NEW METRIC WITH APPLICATIONS TO PHYSICS AND SOLVING CERTAIN HIGHER ORDERED DIFFERENTIAL EQUATIONS' has been published in Physics Essays(AIP) and appeared in their June 2010 quarterly. 40 years ago I took an honors degree in applied mathematics from the University of Waterloo. My interest was Relativity and my last year there saw me complete a 900 level course under Hanno Rund on his work in relativity,as well as differential geometry(pure math) and of course analysis. I continued researching new ideas and knowledge since that time and I have prepared a book for publication titled Paradigms Shift&. I maintain my blog as a day book and research tool to retain data and record impressions and interpretations on material read. Do join my blog and receive Four items of interest daily Monday through Saturday.